What's happening
This bill requires all limited liability companies in New York to disclose and update lists of their beneficial owners, making some information publicly available.
Why it matters
Increases transparency and accountability. By requiring LLCs to publicly disclose beneficial owners (real people who ultimately control or profit from the company), the bill aims to deter the use of anonymous shell companies for money laundering, tax evasion, or illicit activities, making it harder to hide behind corporate structures.
Creates searchable public records. The Department of State will maintain a public database of beneficial owners (disclosing names and addresses for those owning two or more LLCs), which can help journalists, law enforcement, and the public trace who actually controls multiple companies and spot patterns that might indicate fraud or abuse.
Imposes significant compliance and privacy requirements. LLCs must keep their beneficial ownership information up to date, file annual reports, and face stiff penalties (up to $10,000 and possible imprisonment) for knowingly providing false information or failing to update records. There are also procedures for owners with legitimate privacy concerns to seek a waiver from public disclosure.
Affects both new and existing LLCs (including foreign LLCs). All companies formed before the law must comply within a year, not just newly created ones. Foreign LLCs doing business in New York face similar disclosure and updating requirements, expanding the law’s reach to entities formed outside the state but operating within it.
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Who cares
Headline styles
Reveal LLC Owners' Identities
Plain English, a few words. Used as the page title.
Sponsors
1 Co-sponsor
History
- Referred to corporations, authorities and commissions
- Referred to corporations, authorities and commissions
Full text
4 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2255
2019-2020 Regular Sessions
IN SENATE
January 23, 2019
Introduced by Sens. HOYLMAN, KRUEGER -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions
AN ACT to amend the limited liability company law, in relation to requiring limited liability companies to amend their articles of organization to include a list of beneficial owners and provide certain information relating to each beneficial owner
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 102 of the limited liability company law is amended by adding a new subdivision (d-1) to read as follows:
(d-1) (1) "Beneficial owner" means a natural person who, directly or indirectly, (A) holds a membership interest in a limited liability company or a foreign limited liability company; or (B) has been assigned a membership interest in a limited liability company or a foreign limited liability company.
(2) The term "beneficial owner" shall not include: (A) a minor child; (B) a person acting as a nominee, intermediary, custodian, or agent on behalf of another person; (C) a person acting solely as an employee of a limited liability company and whose control over or economic benefits from the limited liability company derives solely from the employment status of the person; (D) a person whose only interest in a limited liability company is through a right of inheritance, unless the person also meets the requirements of paragraph one of this subdivision; or (E) a creditor of a limited liability company, unless the creditor also meets the requirements of paragraph one of this subdivision.
§ 2. Paragraphs 6 and 7 of subdivision (e) of section 203 of the limited liability company law, as added by chapter 470 of the laws of 1997, are amended to read as follows:
(6) if all or specified members are to be liable in their capacity as members for all or specified debts, obligations or liabilities of the
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD08557-01-9
S. 2255 2
limited liability company as authorized pursuant to section six hundred nine of this chapter, a statement that all or specified members are so liable for such debts, obligations or liabilities in their capacity as members of the limited liability company as authorized pursuant to section six hundred nine of this chapter; [and]
(7) a list of the beneficial owners of the limited liability company that identifies each beneficial owner by (A) name; (B) current residential or business street address; and (C) a unique identifying number from a non-expired passport issued by the United States or a non-expired driver's license or identification card issued by this or another state; and
(8) any other provisions, not inconsistent with law, that the members elect to include in the articles or organization for the regulation of the internal affairs of the limited liability company, including, but not limited to, (A) the business purpose for which the limited liability company is formed, (B) a statement of whether there are limitations on the authority of members or managers or a class or classes thereof to bind the limited liability company and (C) any provisions that are required or permitted to be included in the operating agreement of the limited liability company pursuant to section four hundred seventeen of this chapter.
§ 3. Section 209 of the limited liability company law is amended to read as follows:
§ 209. Filing with the department of state. A signed articles of organization and any signed certificate of amendment or other certificates filed pursuant to this chapter or of any judicial decree of amendment or cancellation shall be delivered to the department of state. If the instrument that is delivered to the department of state for filing complies as to form with the requirements of law and the filing fee required by any statute of this state in connection therewith has been paid, the instrument shall be filed and indexed by the department of state. The department of state shall not review such articles or certificates for legal sufficiency, except that it shall review such articles or certificates for legal sufficiency with regard to requirements pertaining to beneficial owners pursuant to sections two hundred three and two hundred eleven of this article; its review shall be otherwise limited to determining that the form has been completed.
§ 4. Paragraphs 8 and 9 of subdivision (d) of section 211 of the limited liability company law are amended to read as follows:
(8) the discovery of a materially false or inaccurate statement in the articles of organization; [and]
(9) a change in the list of beneficial owners or the information required to be provided relating to each beneficial owner pursuant to section two hundred three of this article; and
(10) the decision to change any other statement in the articles of organization.
§ 5. The limited liability company law is amended by adding a new section 215 to read as follows:
§ 215. Beneficial ownership disclosure. (a) A limited liability company whose original articles of organization were filed with the secretary of state and effective prior to the effective date of this section shall have one year from the effective date of this section to amend its articles of organization to include a list of beneficial owners and the information required to be provided relating to each beneficial owner pursuant to section two hundred three of this article.
S. 2255 3
(b) Starting one year after the effective date of this section, each limited liability company organized in this state shall submit to the department of state an annual filing, in such format as the secretary of state shall require, containing the list of beneficial owners of the limited liability company and the information required to be provided relating to each beneficial owner pursuant to section two hundred three of this article.
(c) The department of state shall establish and maintain a database identifying beneficial owners by name and current residential or business street address if they are the beneficial owners of two or more limited liability companies required by this article to report its beneficial owners to such department. Such database shall be made available to the public on the department of state's website no later than seven days after such information has been received by the secretary of state. Such department shall also establish, through regulations, procedures to allow beneficial owners with significant privacy interests to apply for a waiver from the requirements of this subdivision.
(d) Beneficial ownership information relating to each limited liability company formed under the laws of this state is required to be maintained by the secretary of state until the end of the five year period beginning on the date that the limited liability company terminates pursuant to this chapter.
(e) Any person who: (1) knowingly provides false or fraudulent beneficial ownership information; (2) willfully fails to provide complete or updated information; or (3) discloses the existence of a subpoena, summons, or other request for beneficial ownership information shall be liable to the state for a civil penalty of not more than ten thousand dollars and may be imprisoned for not more than three years or both.
§ 6. Paragraphs 7 and 8 of subdivision (a) of section 802 of the limited liability company law are amended and a new paragraph 9 is added to read as follows:
(7) a statement that the foreign limited liability company is in existence in the jurisdiction of its formation at the time of the filing of such application; [and]
(8) the name and address of the authorized officer in the jurisdiction of its formation where a copy of its articles of organization is filed or, if no public filing of its articles of organization is required by the law of the jurisdiction of formation, a statement that the foreign limited liability company shall provide, on request, a copy thereof with all amendments thereto (if such documents are in a foreign language, a translation in English thereof under oath of the translator shall be attached thereto), and the name and post office address of the person responsible for providing such copies[.]; and
(9) a list of the beneficial owners of the foreign limited liability company that identifies each beneficial owner by (A) name; (B) current residential or business street address; and (C) a unique identifying number from a non-expired passport issued by the United States or a non-expired driver's license or identification card issued by this or another state.
§ 7. Section 804 of the limited liability company law is amended by adding a new subdivision (c) to read as follows:
(c) Every foreign limited liability company that has received a filing receipt entitled "Certificate of authority of .... (name of foreign limited liability company) under section eight hundred five of the Limited Liability Company Law," evidencing authority as provided herein, shall amend its application for authority upon a change in the list of
S. 2255 4
beneficial owners or the information required to be provided relating to each beneficial owner pursuant to section eight hundred two of this article, within ninety days of such change.
§ 8. The limited liability company law is amended by adding a new section 810 to read as follows:
§ 810. Beneficial ownership disclosure. (a) A foreign limited liability company whose certificate of authority was filed with the secretary of state and effective prior to the effective date of this section shall have one year from the effective date of this section to amend its certificate of authority to include a list of beneficial owners and the information required to be provided relating to each beneficial owner pursuant to section eight hundred two of this article.
(b) Starting one year after the effective date of this section, each foreign limited liability company organized in this state shall submit to the department of state an annual filing, in such format as the secretary of state shall require, containing the list of beneficial owners of the foreign limited liability company and the information required to be provided relating to each beneficial owner pursuant to section eight hundred two of this article.
(c) The department of state shall establish and maintain a database identifying beneficial owners by name and current residential or business street address if they are the beneficial owners of two or more limited liability companies required by this article to report its beneficial owners to such department. Such database shall be made available to the public on the department of state's website no later than seven days after such information has been received by the secretary of state. Such department shall also establish, through regulations, procedures to allow beneficial owners with significant privacy interests to apply for a waiver from the requirements of this subdivision.
(d) Beneficial ownership information relating to each foreign limited liability company formed under the laws of this state is required to be maintained by the secretary of state until the end of the five year period beginning on the date that the foreign limited liability company terminates pursuant to this chapter.
(e) Any person who: (1) knowingly provides false or fraudulent beneficial ownership information; (2) willfully fails to provide complete or updated information; or (3) discloses the existence of a subpoena, summons, or other request for beneficial ownership information shall be liable to the state for a civil penalty of not more than ten thousand dollars and may be imprisoned for not more than three years or both.
§ 9. This act shall take effect immediately.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the limited liability company law, in relation to requiring limited liability companies to amend their articles of organ- ization to include a list of beneficial owners and provide certain information relating to each beneficial owner
Summary of provisions
Section 1 of the bill amends section 102 of the limited liability compa- ny law by creating a new subdivision (d-1) defining the term "beneficial owner." That term is defined in the bill as a natural person who direct- ly or indirectly holds, or has been assigned, a membership interest in a limited liability company or a foreign limited liability company. Bene- ficial owners generally do not include minors, persons acting as nomi- nees, intermediaries, custodians, or agents on behalf of another person, persons acting solely as an employee of a limited liability company, persons whose only interest in a limited liability company is through a right of inheritance, or a creditor of the a limited liability company.
Section 2 of the bill amends section 203 of the limited liability compa- ny law to require the articles of organization for LLCs organized in New York State to include a list of the beneficial owners of the LLC, along with addresses and a unique identifying number from a government-issued ID card.
Read the full memo (1,435 words)
Section 3 of the bill amends section 209 of the limited liability compa- ny law to direct the New York State Department of State to review LLCs' articles of organization for legal sufficiency with regard to the bene- ficial owner disclosure requirements of sections 203 and 211 of the limited liability company law.
Section 4 of the bill amends section 211 of the limited liability compa- ny law to require an LLC to amend its articles of organization no later than ninety days after a change in the list of the LLC's beneficial owners or a change in the information about the beneficial owners required by section 203 of the limited liability company law.
Section 5 of the bill amends the limited liability company law by adding a new section 215, which does the following:
-Requires LLCs whose articles of organization were filed with the New York State Department of State prior to the effective date of this bill to, within one year from the effective date of the bill, amend their articles of organization to include a list of beneficial owners and the information relating to each beneficial owner required by section 203 of the limited liability company law.
-Requires LLCs organized in New York State to annually submit to the New York State Department of State a list of the LLC's beneficial owners and the information relating to each beneficial owner required by section 203 of the limited liability company law.
-Requires the New York State Department of State to establish and main- tain an online database identifying LLCs' beneficial owners by name and current residential or business address, if they are the beneficial owners of two or more LLCs, for the duration of an LLC's organization in New York State until five years from the date an LLC terminates its articles of organization pursuant to New York State law.
-Provides that any person who knowingly provides false or fraudulent beneficial ownership information, willfully fails to provide complete or updated information, or discloses the existence of a subpoena, summons, or other request for beneficial ownership information shall be liable to the state for a civil penalty of up to $10,000 and may be imprisoned for up to three years.
Section 6 of the bill amends section 802 of the limited liability compa- ny law to require the application for authority to do business in New York State for foreign LLCs to include a list of the beneficial owners of the foreign LLC, along with addresses and a unique identifying number from a government-issued ID card.
Section 7 of the bill amends section 804 of the limited liability compa- ny law to require a foreign LLC authorized to do business in New York State to amend its certificate of authority no later than ninety days after a change in the list of the foreign LLC's beneficial owners or a change in the information about the beneficial owners required by section 802 of the limited liability company law.
Section 8 of the bill amends the limited liability company law by adding a new section 810, which does the following:
-Requires foreign LLCs whose certificates of authority were filed with the New York State Department of State prior to the effective date of this bill to, within one year from the effective date of the bill, amend their certificates of authority to include a list of beneficial owners and the information relating to each beneficial owner required by section 802 of the limited liability company law.
-Requires foreign LLCs authorized to do business in New York State to annually submit to the New York State Department of State a list of the foreign LLC's beneficial owners and the information relating to each beneficial owner required by section 802 of the limited liability compa- ny law.
-Requires the New York State Department of State to establish and main- tain an online database identifying foreign LLCs' beneficial owners by name and current residential or business address, if they are the bene- ficial owners of two or more LLCs, for the duration of a foreign LLC's authorization to do business in New York State until five years from the date a foreign LLC surrenders its certificate of authority or dissolves or terminates its existence pursuant to New York State law.
-Provides that any person who knowingly provides false or fraudulent beneficial ownership information, willfully fails to provide complete or updated information, or discloses the existence of a subpoena, summons, or other request for beneficial ownership information shall be liable to the state for a civil penalty of up to $10,000 and may be imprisoned for up to three years.
Section 9 of the bill is the effective date.
Justification
A limited liability company (LLC) is an unincorporated organization of one or more persons that combines the limited liability typically enjoyed by corporations with the flexibility that comes from a partner- ship. In many states, LLC owners are afforded substantial anonymity. In New York, reporting requirements are stunningly lax, with no requirement that a domestic or foreign LLC doing business in the state disclose its beneficial owners - the people who ultimately hold a membership interest in an LLC.
The Department of State maintains a "Corporation and Business Entity Database" on its website that allows users to search by business name for corporations, not-for-profits, limited partnerships, LLCs, and other miscellaneous businesses registered with the Department. However, the amount of information listed on each LLC is paltry, including the name of the LLC, initial file date, whether it is currently active, the state or county in which it is located, and a contact address for the purposes of serving process.
While the vast majority of LLC owners are law-abiding business owners, LLCs can also provide anonymity to embezzlers, traffickers, drug deal- ers, tax evaders, terrorists, and others who wish to hide or obscure illicit funds. Further, unscrupulous landlords can use LLCs to avoid legal responsibilities, leaving tenants in the dark. Foreign money-laun- dering schemes have involved the purchase of New York real estate through LLCs. In addition, LLC owners can skirt campaign finance laws by making anonymous "dark money" donations.
Obscuring the beneficial owners of an LLC does a disservice to law enforcement, journalists, tax officials, and the public at large.
This bill requires LLCs organized or authorized to do business in New York to publicly disclose a list of their beneficial owners to the Department of State. Newly organized domestic LLCs and foreign LLCs seeking authorization to do business in New York State would be required to include the names, addresses, and identification numbers of their beneficial owners when filing their articles of organization or applica- tions for authority, and LLCs already authorized to do business in the state would have one year from the bill's passage to amend their arti- cles of organization or applications for authority to include informa- tion about their beneficial owners. LLCs would be required to update the Department of State within 90 days of any change to their list of bene- ficial owners. The Department of State would have authority to review this documentation and would make it publicly available on a website.
Legislative history
2018: S.8213 (Hoylman) - Died in Corporations, Authorities and Commis- sions
Effective date
This act shall take effect immediately.
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